TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA chapter 7 chapter TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA 2 74 Total Quality Management Total quality management defined Malcolm Baldrige National Quality Award defined 276 Quality Specification and Quality Costs Developing quality specifications Cost of quality Functions of the QC department 279 Six-Sigma Quality Six-Sigma methodology Analytical tools for Six Sigma and continuous improvement Six-Sigma roles and responsibilities 286 Design quality defined Conformance quality defined Quality at the source defined Dimensions of quality defined Cost of quality defined Six Sigma defined DPMO defined DMAIC defined PCDA cycle defined Continuous improvement defined Kaizen defined Black belts, master black belts, and green belts defined The Shingo System: Fail-Safe Design Fail-safe procedures defined Poka-yoke defined 286 ISO 9000 The ISO 9000 series ISO 9000 certification 289 ISO 9000 defined ISO 14000 defined External Benchmarking for Quality Improvement External benchmarking defined 290 Service Quality Measurement: SERVQUAL SERVQUAL defined e-SERVICE QUALITY defined 291 Conclusion 294 Case: Hank Kolb, Director of Quality Assurance 295 Case: Shortening Customers’ Telephone Waiting Time 298 Case: “Hey, Is Anybody There?” An Example of DMAIC at American Express 7 ● ● ● “This big myth is that Six Sigma is about quality control and statistics. It is that—but it’s much more. Ultimately, it drives leadership to be better by providing tools to think through tough issues. At Six Sigma’s core is an idea that can turn a company inside out, focusing the organization outward on the customer.” —Jack Welch, Straight from the Gut (New York: Warner Business Books, 2001), p. 330. What is GE doing with Six Sigma under Welch’s successor Jeffery R. Immelt? More than ever, GE is spending $600 million on Six Sigma projects in 2002— mostly for the salaries of 4,000 full time experts and 100,000 employees who have undergone basic training. They not only have targeted finding $2.5 billion in savings in GE, but are sending out its Sigma Squads to customers such as Dell Computers and Wal-Mart to help them root out what they estimate to be $1 billion in inefficiencies and waste. —Michael Arndt, “Quality Isn’t Just for Widgets,” Business Week, July 22, 2002, p. 72. The opening quote from the former chairman and CEO of General Electric captures the essence of what made GE’s program so successful, and the excerpt from a recent Business Week shows that Six Sigma is still a major part of GE’s operations, and an important part of the American quality movement. –> 274 section 2 PRODUCT DESIGN AND PROCESS SELECTION In this chapter, we first review the general subject of total quality management and the quality movement. We then develop the basic features and concepts of the Six Sigma approach to TQM. We then describe the Shingo system, which takes a unique approach to quality by focusing on preventing mistakes. This is followed by a review of ISO 9000 standards for quality certification used by many companies throughout the world. We then provide the major steps of external benchmarking for quality improvement. We conclude with a presentation of SERVQUAL, a tool designed expressly for measuring quality in service delivery. T O TA L Q U A L I T Y M A N A G E M E N T Total quality management ● ● ● Total quality management may be defined as “managing the entire organization so that it excels on all dimensions of products and services that are important to the customer.” It has two fundamental operational goals, namely 1 Careful design of the product or service. 2 Ensuring that the organization’s systems can consistently produce the design. These two goals can only be achieved if the entire organization is oriented toward them— hence the term total quality management. TQM became a national concern in the United States in the 1980s primarily as a response to Japanese quality superiority in manufacturing automobiles and other durable goods such as room air conditioners. A widely cited study of Japanese and U.S. air-conditioning manufacturers showed that the best quality American products had higher average defect rates than those of the poorest Japanese manufacturers.1 So severe was the quality shortfall in the United States that improving it throughout industry B breakthrough R E A K T H R O U G H BALDRIGE QUALITY AWARD The Baldrige Quality Award is given to organizations that have demonstrated outstanding quality in their products and processes. Three awards may be given annually in each of these categories: manufacturing, service, small business, and, starting in 1999, education and health care. Candidates for the award must submit an application of up to 75 pages that details the approach, deployment, and results of their quality activities under seven major categories: Leadership, Strategic Planning, Customer and Market Focus, Information and Analysis, Human Resource Focus, Process Management, and Business Results. These applications are scored on total points out of 1,000 by examiners and judges. Those who score above roughly 650 are selected for site visits. Winners selected from this group are then honored at an annual meeting in Washington, DC. A major benefit to all applicants is feedback from the examiners, which is essentially an audit of their practices. Many states have used the Baldrige Criteria as the basis of their own quality award programs. A report, Building on Baldrige: American Quality for the 21st Century, by the private Council on Competitiveness, said, “More than any other program, the Baldrige Quality Award is responsible for making quality a national priority and disseminating best practices across the United States.” TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA became a national priority, with the Department of Commerce establishing the Malcolm Baldrige National Quality Award in 1987 to help companies review and structure their quality programs. Also gaining major attention at this time was the requirement that suppliers demonstrate that they are measuring and documenting their quality practices according to specified criteria, called ISO standards, if they wished to compete for international contracts. We will have more to say about this later. The philosophical leaders of the quality movement, notably Philip Crosby, W. Edwards Deming, and Joseph M. Juran—the so called Quality Gurus—had slightly different definitions of what quality is and how to achieve it (see Exhibit 7.1), but they all had the same general message: To achieve outstanding quality requires quality leadership from senior management, a customer focus, total involvement of the workforce, and continuous improvement based upon rigorous analysis of processes. Later in the chapter, we will discuss how these precepts are applied in the latest approach to TQM—Six Sigma. We will now turn to some fundamental concepts that underlie any quality effort: quality specifications and quality costs. chapter 7 Malcolm Baldrige National Quality Award EXHIBIT 7.1 The Quality Gurus Compared CROSBY DEMING JURAN Definition of quality Conformance to requirements A predictable degree of uniformity and dependability at low cost and suited to the market Fitness for use (satisfies customer’s needs) Degree of senior management responsibility Responsible for quality Responsible for 94% of quality problems Less than 20% of quality problems are due to workers Performance standard/ motivation Zero defects Quality has many “scales”; use statistics to measure performance in all areas; critical of zero defects Avoid campaigns to do perfect work General approach Prevention, not inspection Reduce variability by continuous improvement; cease mass inspection General management approach to quality, especially human elements Structure 14 steps to quality improvement 14 points for management 10 steps to quality improvement Statistical process control (SPC) Rejects statistically acceptable levels of quality [wants 100% perfect quality] Statistical methods of quality control must be used Recommends SPC but warns that it can lead to tool-driven approach Improvement basis A process, not a program; improvement goals Continuous to reduce variation; eliminate goals without methods Project-by-project team approach; set goals Teamwork Quality improvement teams; quality councils Employee participation in decision making; break down barriers between departments Team and quality circle approach Costs of quality Cost of nonconformance; quality is free No optimum; continuous improvement Quality is not free; there is not an optimum Purchasing and goods received State requirements; supplier is extension of business; most faults due to purchasers themselves Inspection too late; sampling allows defects to enter system; statistical evidence and control charts required Problems are complex; carry out formal surveys Vendor rating Yes; quality audits useless No, critical of most systems Yes, but help supplier improve 275 276 section 2 PRODUCT DESIGN AND PROCESS SELECTION Q U A L I T Y S P E C I F I C AT I O N A N D QUALITY COSTS ● ● ● Fundamental to any quality program is the determination of quality specifications and the costs of achieving (or not achieving) those specifications. D E V E LO P I N G Q U A L I T Y S P E C I F I C AT I O N S Design quality Conformance quality Quality at the source Serv i ce Dimensions of quality EXHIBIT 7.2 The Dimensions of Design Quality The quality specifications of a product or service derive from decisions and actions made relative to the quality of its design and the quality of its conformance to that design. Design quality refers to the inherent value of the product in the marketplace and is thus a strategic decision for the firm. The common dimensions of design quality are listed in Exhibit 7.2. Conformance quality refers to the degree to which the product or service design specifications are met. The activities involved in achieving conformance are of a tactical, day-to-day nature. It should be evident that a product or service can have high design quality but low conformance quality, and vice versa. Quality at the source is frequently discussed in the context of conformance quality. This means that the person who does the work takes responsibility for making sure that his or her output meets specifications. Where a product is involved, achieving the quality specifications is typically the responsibility of manufacturing management; in a service industry, it is usually the responsibility of the branch operations management. Exhibit 7.3 shows two examples of the dimensions of quality. One is a stereo amplifier that meets the signal-to-noise ratio standard; the second is a checking account transaction in a bank. DIMENSION MEANING Performance Primary product or service characteristics Features Added touches, bells and whistles, secondary characteristics Reliability Consistency of performance over time, probability of failing Durability Useful life Serviceability Ease of repair Response Characteristics of the human-to-human interface (speed, courtesy, competence) Aesthetics Sensory characteristics (sound, feel, look, and so on) Reputation Past performance and other intangibles (perceived quality) SOURCE FOR EXHIBITS 7.1 AND 7.2: MODIFIED FROM JOHN S. OAKLAND, TOTAL QUALITY MANAGEMENT (LONDON: HEINEMANN PROFESSIONAL PUBLISHING LTD., 1989), PP. 291–92. EXHIBIT 7.3 Examples of Dimensions of Quality MEASURES DIMENSION PRODUCT EXAMPLE: STEREO AMPLIFIER SERVICE EXAMPLE: CHECKING ACCOUNT AT A BANK Performance Signal-to-noise ratio, power Time to process customer requests Features Remote control Automatic bill paying Reliability Mean time to failure Variability of time to process requests Durability Useful life (with repair) Keeping pace with industry trends Serviceability Modular design Online reports Response Courtesy of dealer Courtesy of teller Aesthetics Oak-finished cabinet Appearance of bank lobby Reputation Market leader for 20 years Endorsed by community leaders SOURCE: MODIFIED FROM PAUL E. PISEK, “DEFINING QUALITY AT THE MARKETING/DEVELOPMENT INTERFACE,” QUALITY PROGRESS, JUNE 1987, PP. 28–36. TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA chapter 7 277 GLOBAL MANUFACTURING FOR MENNEN SPEEDSTICK® DEODORANT AT A SINGLE LOCATION IN MORRISTOWN, NJ, SERVES 48 DIFFERENT COUNTRIES. THE TECHNICIAN IS INSPECTING THE MULTILANGUAGE LABELING THAT ENABLES THE SAME PRODUCT TO BE SOLD IN VARIOUS Glob COUNTRIES. al Both quality of design and quality of conformance should provide products that meet the customer’s objectives for those products. This is often termed the product’s fitness for use, and it entails identifying the dimensions of the product (or service) that the customer wants (that is, the voice of the customer) and developing a quality control program to ensure that these dimensions are met. COST OF QUALITY Although few can quarrel with the notion of prevention, management often needs hard numbers to determine how much prevention activities will cost. This issue was recognized by Joseph Juran, who wrote about it in 1951 in his Quality Control Handbook. Today, cost of quality (COQ) analyses are common in industry and constitute one of the primary functions of QC departments. There are a number of definitions and interpretations of the term cost of quality. From the purist’s point of view, it means all of the costs attributable to the production of quality that is not 100 percent perfect. A less stringent definition considers only those costs that are the difference between what can be expected from excellent performance and the current costs that exist. How significant is the cost of quality? It has been estimated at between 15 and 20 percent of every sales dollar—the cost of reworking, scrapping, repeated service, inspections, tests, warranties, and other quality-related items. Philip Crosby states that the correct cost for a well-run quality management program should be under 2.5 percent.2 Three basic assumptions justify an analysis of the costs of quality: (1) failures are caused, (2) prevention is cheaper, and (3) performance can be measured. The costs of quality are generally classified into four types: 1 2 3 4 Appraisal costs. Costs of the inspection, testing, and other tasks to ensure that the product or process is acceptable. Prevention costs. The sum of all the costs to prevent defects, such as the costs to identify the cause of the defect, to implement corrective action to eliminate the cause, to train personnel, to redesign the product or system, and to purchase new equipment or make modifications. Internal failure costs. Costs for defects incurred within the system: scrap, rework, repair. External failure costs. Costs for defects that pass through the system: customer warranty replacements, loss of customers or goodwill, handling complaints, and product repair. Cost of quality 278 section 2 PRODUCT DESIGN AND PROCESS SELECTION EXHIBIT 7.4 CURRENT MONTH’S COST PERCENTAGE OF TOTAL Prevention costs Quality training Reliability consulting Pilot production runs Systems development $ 2,000 10,000 5,000 8,000 1.3% 6.5 3.3 5.2 Total prevention 25,000 16.3 Appraisal costs Materials inspection Supplies inspection Reliability testing Laboratory testing 6,000 3,000 5,000 25,000 3.9 2.0 3.3 16.3 Total appraisal 39,000 25.5 15,000 18,000 12,000 6,000 9.8 11.8 7.8 3.9 51,000 33.3 14,000 6,000 3,000 10,000 5,000 9.2 3.9 2.0 6.5 3.3 38,000 24.9 $153,000 100.0 Quality Cost Report Internal failure costs Scrap Repair Rework Downtime Total internal failure External failure costs Warranty costs Out-of-warranty repairs and replacement Customer complaints Product liability Transportation losses Total external failure Total quality costs Serv i ce Exhibit 7.4 illustrates the type of report that might be submitted to show the various costs by categories. Prevention is the most important influence. A rule of thumb says that for every dollar you spend in prevention, you can save $10 in failure and appraisal costs. Often increases in productivity occur as a by-product of efforts to reduce the cost of quality. A bank, for example, set out to improve quality and reduce the cost of quality and found that it had also boosted productivity. The bank developed this productivity measure for the loan processing area: the number of tickets processed divided by the resources required (labor cost, computer time, ticket forms). Before the quality improvement program, the productivity index was 0.2660 [2,080/($11.23 × 640 hours + $0.05 × 2,600 forms + $500 for systems costs)]. After the quality improvement project was completed, labor time fell to 546 hours and the number of forms fell to 2,100, for a change in the index to 0.3088, an increase in productivity of 16 percent. FUNCTIONS OF THE Q C D E PA RT M E N T Although the focus of this chapter is on corporatewide quality programs, it is useful to comment on the functions of QC departments. The typical manufacturing QC department has a variety of functions to perform. These include testing designs for their reliability in the lab and the field; gathering performance data on products in the field and resolving quality problems in the field; planning and budgeting the QC program in the plant; and, finally, designing and overseeing quality control systems and inspection procedures, and actually carrying out inspection activities requiring special technical knowledge to accomplish. The tools of the QC department fall under the heading of statistical quality control (SQC) and consist of two main sections: acceptance sampling and process control. These topics are covered in the technical note to this chapter. TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA chapter 7 THE THEORY BEHIND SIX SIGMA Six Sigma reflects the goal of having the customer’s specification limits of the items produced by a process be twice the natural variation (±3σ) of the process outputs (or, to put it another way, the process variation to be half the specification limits). For example, suppose the outputs of a process are normally distributed as shown above line A in Exhibit 7.5. By the definition of ±3σ (σ is the standard deviation), 99.73 percent of the outputs are within ±3σ of the mean and, therefore, .27 percent are outside ±3σ of the mean. Thus, if the specification limits of the product are set equal to ±3σ for the process, we could expect .27 percent of the outputs to be out of specification. That is, we could expect 2.7 units per thousand or 2,700 units or parts per million (ppm) to be out of specification. Now suppose that we decide that a defect rate of 2,700 ppm is too high. If the specification limits are kept at the same place and the process is improved so the output variation is much less, the probability of producing a unit out of specification will go down. This is shown below line B in the exhibit. In particular, suppose the process is improved to the point where the interval of natural variation (±3σ) of the process is half of the interval of the specification limits (which then, by definition, will be ±6σ for the process outputs). Then, the probability of producing a unit outside the ±3σ interval remains .0027 (by definition of ±3σ), but the probability of having a part produced out of the specification interval is an order of magnitude less—about two parts per billion (by the definition of ±6σ). Details about the statistical characteristics of Six Sigma are covered in Technical Note 7. Comparison of Three Sigma and Six Sigma Distributions EXHIBIT 7.5 2700 ppm outside 3 limits A ⫺3 ⫹3 spec limits B ⫺6 2700 ppm outside spec limits ⫹6 2700 ppm outside 3 limits 2 ppb outside 6 limits 2 ppb outside spec limits ⫺3 ⫹3 S I X- S I G M A Q U A L I T Y ● ● ● Six-Sigma refers to the philosophy and methods companies such as General Electric and Motorola use to eliminate defects in their products and processes. A defect is simply any component that does not fall within the customer’s specification limits. Each step or activity in a company represents an opportunity for defects to occur and Six-Sigma programs seek to reduce the variation in the processes that lead to these defects. Indeed, Six-Sigma advocates see variation as the enemy of quality, and much of the theory underlying Six Sigma is devoted to dealing with this problem. A process that is in Six-Sigma control will produce no more than two defects out of every billion units. Six Sigma 279 280 section 2 DPMO PRODUCT DESIGN AND PROCESS SELECTION One of the benefits of Six-Sigma thinking is that it allows managers to readily describe the performance of a process in terms of its variability and to compare different processes using a common metric. This metric is defects per million opportunities (DPMO). This calculation requires three pieces of data: 1 Unit. The item produced or being serviced. 2 Defect. Any item or event that does not meet the customer’s requirements. 3 Opportunity. A chance for a defect to occur. A straightforward calculation is made using the following formula: DPMO = Number of defects × 1,000,000 Number of opportunities for error per unit × Number of units EXAMPLE 7.1 The customers of a mortgage bank expect to have their mortgage applications processed within 10 days of filing. This would be called a critical customer requirement, or CCR, in Six-Sigma terms. Suppose all defects are counted (loans in a monthly sample taking more than 10 days to process), and it is determined that there are 150 loans in the 1,000 applications processed last month that don’t meet this customer requirement. Thus, the DPMO = 150/1000 × 1,000,000, or 150,000 loans out of every million processed that fail to meet a CCR. Put differently, it means that only 850,000 loans out of a million are approved within time expectations. Statistically, 15 percent of the loans are defective and 85 percent are correct. This is a case where all the loans processed in less than 10 days meets our criteria. Often there are upper and lower customer requirements rather than just a single upper requirement as we have here. • There are two aspects to Six-Sigma programs: the methodology side and the people side. We will take these up in order. SIX-SIGMA METHODOLOGY DMAIC PCDA cycle Continuous improvement Kaizen While Six Sigma’s methods include many of the statistical tools that were employed in other quality movements, here they are employed in a systematic project-oriented fashion through the define, measure, analyze, improve, and control (DMAIC) cycle. The DMAIC cycle is a more detailed version of the Deming PCDA cycle, which consists of four steps—plan, do, check, and act—that underly continuous improvement. (Continuous improvement, also called kaizen, seeks continual improvement of machinery, materials, labor utilization, and production methods through applications of suggestions and ideas of company teams.) Like Six Sigma, it also emphasizes the scientific method, particularly hypothesis testing about the relationship between process inputs (X’s) and outputs (Y’s) using design of experiments (DOE) methods. The availability of modern statistical software has reduced the drudgery of analyzing and displaying data and is now part of the Six-Sigma tool kit. The overarching focus of the methodology, however, is understanding and achieving what the customer wants, since that is seen as the key to profitability of a production process. In fact, to get across this point, some use the DMAIC as an acronym for “Dumb Managers Always Ignore Customers.” The standard approach to Six-Sigma projects is the DMAIC methodology developed by General Electric, described below:3 1 2 Define (D) • Identify customers and their priorities. • Identify a project suitable for Six-Sigma efforts based on business objectives as well as customer needs and feedback. • Identify CTQs (critical-to-quality characteristics) that the customer considers to have the most impact on quality. Measure (M) • Determine how to measure the process and how it is performing. • Identify the key internal processes that influence CTQs and measure the defects currently generated relative to those processes. TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA 3 Analyze (A) • Determine the most likely causes of defects. • Understand why defects are generated by identifying the key variables that are most likely to create process variation. 4 Improve (I) • Identify means to remove the causes of defects. • Confirm the key variables and quantify their effects on the CTQs. • Identify the maximum acceptance ranges of the key variables and a system for measuring deviations of the variables. • Modify the process to stay within an acceptable range. 5 Control (C) • Determine how to maintain the improvements. • Put tools in place to ensure that the key variables remain within the maximum acceptance ranges under the modified process. A N A LY T I C A L TO O L S F O R S I X S I G M A CONTINUOUS IMPROVEMENT AND The analytical tools of Six Sigma have been used for many years in traditional quality improvement programs. What makes their application to Six Sigma unique is the integration of these tools in a corporatewide management system. The tools common to all quality efforts, including Six Sigma, are flowcharts, run charts, Pareto charts, histograms, checksheets, cause-and-effect diagrams, and control charts. Examples of these, along with an opportunity flow diagram, are shown in Exhibit 7.6 arranged according to DMAIC categories where they commonly appear. Flowcharts. There are many types of flow charts. The one shown in Exhibit 7.6 depicts the process steps as part of a SIPOC (supplier, input, process, output, customer) analysis. SIPOC in essence is a formalized input-output model, used in the define stage of a project. Run charts. They depict trends in data over time, and thereby help to understand the magnitude of a problem at the define stage. Typically, they plot the median of a process. Pareto charts. These charts help to break down a problem into the relative contributions of its components. They are based on the common empirical finding that a large percentage of problems are due to a small percentage of causes. In the example, 80 percent of customer complaints are due to late deliveries, which are 20 percent of the causes listed. Checksheets. These are basic forms that help standardize data collection. They are used to create histograms such as shown on the Pareto chart. Cause-and-effect diagrams. Also called fishbone diagrams, they show hypothesized relationships between potential causes and the problem under study. Once the C&E diagram is constructed, the analysis would proceed to find out which of the potential causes were in fact contributing to the problem. Opportunity flow diagram. This is used to separate value-added from non-valueadded steps in a process. Control charts. These are time-sequenced charts showing plotted values of a statistic including a centerline average and one or more control limits. It is used here to assure that changes introduced are in statistical control. See the technical note following this chapter for a discussion of the various types and uses of charts for process control. Other tools that have seen extensive use in Six-Sigma projects are failure mode and effect analysis (FMEA) and design of experiments (DOE). Failure mode and effect analysis. This is a structured approach to identify, estimate, prioritize, and evaluate risk of possible failures at each stage of a process. It begins with identifying each element, assembly, or part of the process and listing the potential failure modes, potential causes, and effects of each failure. A risk priority number (RPN) is calculated for each failure mode. It is an index used to measure the rank importance of the chapter 7 281 Analytical Tools for Six Sigma and Continuous Improvement Flow Chart of Major Steps in a Process* SUPPLIERS INPUTS Manufacturer Copier Office Supply Company Paper PROCESSES Toner Yourself Original Power Company Electricity OUTPUTS CUSTOMERS Copies You File Others Making a Photocopy Define PROCESS STEPS Put original on glass Close Lid Adjust Settings Press START Run Chart** Average monthly volume of deliveries (per shop) 2700 Remove originals and copies DATA COLLECTION FORMS* Checksheets are basic forms that help standardize data collection by providing specific spaces where people should record data. Defines what data are being collected Machine Downtime (Line 13) 2400 Wendy Operator: __________ 2100 Reason 1,951 deliveries 1800 Carton Transport 1500 Metal Check 600 300 Bad Product Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2500 75 (1890) 1500 50 1000 25 (206) (117) (87) Cold food Taste Other 0 (220) Wrong order 500 May want to add space for tracking stratification factors Has room for comments 100% 2000 Burned flakes Low weight Other Includes place to put the data Pareto Chart** Types of customer complaints Total ⫽ 2520 October—December (across 6 shops) Measure Comments Lists the Sealing Unit characteristics or conditions Barcoding of interest Conveyor Belt 900 0 May 19 Date: __________ Frequency No Product 1200 Late deliveries EXHIBIT 7.6 PRODUCT DESIGN AND PROCESS SELECTION Unit volume section 2 Total # of customer complaints 282 Illustration note: Delivery time was defined by the total time from when the order was placed to when the customer received it. *SOURCE: RATH & STRONG, RATH & STRONG’S SIX SIGMA POCKET GUIDE, 2001. **SOURCE: RAYTHEON SIX SIGMA, THE MEMORY JOGGER™II, 2001. TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA C & E/Fishbone Diagram** Reasons for late pizza deliveries Machinery/Equipment No capacity for peak periods Ovens too small High turnover People Unreliable cars Low pay No money for repairs Kids own junkers No teamwork No training Don’t know town People don’t show up High Low pay turnover High turnover Drivers get lost Rushed Poor training Get wrong Late pizza information deliveries on Fridays & Saturdays Run out of ingredients High turnover Poor use of space Inaccurate ordering Lack of training Poor training Poor use of space Analyze Poor handling of large orders Don’t know town High turnover Poor Lack of experience dispatching Many new streets High turnover Methods Materials Opportunity Flow Diagram* Organized to separate value-added steps from non-value-added steps. Value-Added Steps that are essential even when everything works correctly move down the left side Non-Value-Added Steps that would not be needed if everything worked right the first time move horizontally across the right side YES Copier YES in Use? Take Original Wait? NO Leave NO Place Original NO Glass Dirty? YES Clean Improve Select Size Select Orientation Select Number Paper? NO Box Open? Find Paper NO YES YES YES YES Paper Loaded? NO Control Chart Features* Basic features same as a time plot 100 UCL 90 80 70 60 Control 50 40 30 20 LCL 10 0 J A S O N D J F M A M J Control limits (calculated from data) added to plot Knife? J A S O N D J F M Centerline usually average instead of median Find Help NO Find Knife Open Box chapter 7 283 FMEA Form FMEA Analysis _________(revised) Item or Potential Potential Process Failure Effects of Step Mode Failure Potential Cause(s) Current Controls Recommended Action Total Risk Priority Number: Responsibility and Target Date “After” Action Taken Occurrence Detection RPN Date: ________(original) Team: ___________________ Severity Project: __________________ Detection RPN EXHIBIT 7.7 PRODUCT DESIGN AND PROCESS SELECTION Occurrence section 2 Severity 284 “After” Risk Priority Number: SOURCE: RATH & STRONG, RATH & STRONG’S SIX SIGMA POCKET GUIDE, 2001, P. 31. items listed in the FMEA chart. See Exhibit 7.7. These conditions include the probability that the failure takes place (occurrence), the damage resulting from the failure (severity), and the probability of detecting the failure in-house (detection). High RPN items should be targeted for improvement first. The FMEA suggests a recommended action to eliminate the failure condition by assigning a responsible person or department to resolve the failure by redesigning the system, design, or process and recalculating the RPN. Design of experiments (DOE). DOE, sometimes referred to as multivariate testing, is a statistical methodology used for determining the cause-and-effect relationship between process variables (X’s) and the output variable (Y). In contrast to standard statistical tests, which require changing each individual variable to determine the most influential one, DOE permits experimentation with many variables simultaneously through carefully selecting a subset of them. SIX-SIGMA ROLES AND RESPONSIBILITIES Successful implementation of Six Sigma is based on using sound personnel practices as well as technical methodologies. The following is a brief summary of the personnel practices that are commonly employed in Six-Sigma implementation. 1 Executive leaders, who are truly committed to Six Sigma and who promote it throughout the organization, and champions, who take ownership of the processes that are to be improved. Champions are drawn from the ranks of the TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA chapter 7 285 breakthrough B R E A K T H R O U G H WHAT MAKES A GOOD CHAMPION? At a manufacturing company implementing Six Sigma, a designated champion regularly met with his black belts. At one report-out meeting, a black belt informed him that she needed to purchase and install a table for sorting defects off-line. It would cost about $17,000, but it would provide an alternative to shutting down the entire line, which would cost far more. The controller told her to go through the normal requisition process and she’d have her table in about four months. That delay would have killed the project right then and there: to submit the project to “business as usual” would have shown little real commitment to supporting Six Sigma. So the champion asked for the data that backed up her request, analyzed it, agreed with it, and then got immediate executive sign-off on securing a table the following week. This is the stuff of a good champion: removing barriers and sending a clear signal that he and upper management are aligned and committed to Six Sigma. The champion does whatever it takes to support the black belts. SOURCE: GREG BRUE, SIX SIGMA FOR MANAGERS (NEW YORK: MCGRAW-HILL, 2002), P. 84. EXHIBIT 7.8 B A Master SPONSOR/ CHAMPION Black Belt SPONSOR/ CHAMPION Oversee/Guide Project(s) Organizing the Roles Needed to Support Six-Sigma Efforts Coach/Support Project Leader Master Black Belt Black Belt Black Belt or Green Belt Green Belt or Team Leader Lead Project to Success Analyze & Implement Improvement Improvement Team Improvement Team SOURCE: PETER S. PANDE, ROBERT P. NEUMAN, AND ROLAND R. CAVANAGH, THE SIX SIGMA WAY TEAM FIELDBOOK (NEW YORK: MCGRAW-HILL, 2002), P. 31. 2 executives and managers are expected to identify appropriate metrics early in the project and make certain that the improvement efforts focus on business results. (See the Breakthrough box “What Makes a Good Champion?”) Corporatewide training in Six-Sigma concepts and tools. GE spent over a billion dollars training its professional workforce in the concepts. Now, virtually every professional in the organization is qualified in Six-Sigma techniques. To convey the need to vigorously attack problems, professionals are given martial arts titles reflecting their skills and roles: black belts, who coach or actually lead a Six-Sigma improvement team; master black belts, who receive in-depth training on statistical tools and process improvement (they perform many of the same functions as black belts but for a larger number of teams); and green belts, who are employees who have received enough Six-Sigma training to participate in a team or, in some companies, to work individually on a small-scale project directly related to their own job. Different companies use these “belts” in different combinations with sponsors and champions to guide teams. Several options are shown in Exhibit 7.8. Black belts Master black belts Green belts 286 section 2 PRODUCT DESIGN AND PROCESS SELECTION 3 4 Setting stretch objectives for improvement. Continuous reinforcement and rewards. At GE, before any savings from a project are declared, the black belt in charge must provide proof that the problems are fixed permanently. THE SHINGO SYSTEM: FAIL-SAFE DESIGN ● ● ● The Shingo system developed in parallel and in many ways in conflict with the statistically based approach to quality control. As we discussed in Chapter 6 relating to service applications, this system—or, to be more precise, philosophy of production management—is named after the codeveloper of the Toyota just-in-time system, Shigeo Shingo. Two aspects of the Shingo system in particular have received great attention. One is how to accomplish drastic cuts in equipment setup times by single-minute exchange of die (SMED) procedures. The other, the focus of this section, is the use of source inspection and the poka-yoke system to achieve zero defects. Shingo has argued that SQC methods do not prevent defects. Although they provide information to tell us probabilistically when a defect will occur, they are after the fact. The way to prevent defects from coming out at the end of a process is to introduce controls within the process. Central to Shingo’s approach is the difference between errors and defects. Defects arise because people make errors. Even though errors are inevitable, defects can be prevented if feedback leading to corrective action takes place immediately after the errors are made. Such feedback and action require inspection, which should be done on 100 percent of the items produced. This inspection can be one of three types: successive check, self-check, and source inspection. Successive check inspection is performed by the next person in the process or by an objective evaluator such as a group leader. Information on defects is immediate feedback for the worker who produced the product, who then makes the repair. Selfcheck is done by the individual worker and is appropriate by itself on all but items that require sensory judgment (such as existence or severity of scratches, or correct matching of shades of paint). These require successive checks. Source inspection is also performed by the individual worker, except instead of checking for defects, the worker checks for the errors that will cause defects. (See Exhibit 7.9 for sources of defects attributable to the worker.) This prevents the defects from ever occurring and, hence, requiring rework. All three types of inspection rely on controls consisting of fail-safe procedures or devices (called pokayoke). Poka-yoke includes such things as checklists or special tooling that (1) prevents the worker from making an error that leads to a defect before starting a process or (2) gives rapid feedback of abnormalities in the process to the worker in time to correct them. There is a wide variety of poka-yokes, ranging from kitting parts from a bin (to ensure that the right number of parts are used in assembly) to sophisticated detection and electronic signaling devices. An example taken from the writings of Shingo is shown in Exhibit 7.10. There is a good deal more to say about the work of Shingo. Blasting industry’s preoccupation with control charts, Shingo states they are nothing but a mirror reflecting current conditions. When a chemical plant QC manager proudly stated that it had 200 charts in a plant of 150 people, Shingo asked him if “they had a control chart for control charts.”4 In addition to his insights into the quality area, his work on SMED is must reading for manufacturing executives. Fail-safe procedures Poka-yoke ISO 9000 Glob ISO 9000 al www.iso.ch ISO 14000 ● ● ● ISO 9000 is a series of standards agreed upon by the International Organization for Standardization (ISO) and adopted in 1987. More than 100 countries now recognize the 9000 series for quality standards and certification for international trade. ISO 9000 evolved in Europe; in the European Common Market (ECM) alone, almost 50,000 companies have been certified as complying with these standards. In addition to the ISO 9000 series, there is also the ISO 14000 series, which was developed to control the impact of an organization’s activities and outputs on the environment. The ISO 14000 standards can lead to benefits such as reducing the cost of waste management, conserving energy and materials, lowering distribution costs, and improving corporate image. TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA chapter 7 EXHIBIT 7.9 What Are the Sources of Defects? There are various types of defects. In order of importance these are 1. Omitted processing Sources of Defects 6. Processing wrong workpiece 2. Processing errors 7. Misoperation 3. Errors setting up workpieces 8. Adjustment error 4. Missing parts 9. Equipment not set up properly 5. Wrong parts 10. Tools and jigs improperly prepared What are the connections between these defects and the mistakes people make? Causal connections between defects and human errors Omitted processing Processing errors Errors setting up workpieces Missing parts Wrong parts Processing wrong workpiece Misoperation Adjustment error Improper equipment setup Improper tools and jigs SOURCE: N. K. SHIMBUN, LTD./FACTORY MAGAZINE (ED.), POKA-YOKE: IMPROVING PRODUCT QUALITY BY PREVENTING DEFECTS (CAMBRIDGE, MA: PRODUCTIVITY PRESS, 1989), P. 14. FROM POKA-YOKE: IMPROVING PRODUCT QUALITY BY PREVENTING DEFECTS, EDITED BY NKS/FACTORY MAGAZINE. COPYRIGHT © 1987 PRODUCTIVITY, INC, PO BOX 13390, PORTLAND, OR 97213. 800-394-6868. www.productivityinc.com THE ISO 9000 SERIES ISO 9000 consists of five primary parts numbered as 9000 through 9004. If we were to display them on a continuum of an operating firm, the series would range from design and development through procurement, production, installation, and servicing (Exhibit 7.11). Whereas ISO 9000 and 9004 only establish guidelines for operation, ISO 9001, 9002, and 9003 are well-defined standards. SURPRISE Connected NONSUPERVISION SLOWNESS INADVERTENT WILLFULL AMATEURS MISIDENTIFICATION FORGETFUL CAUSES OF DEFECTS MISUNDERSTANDING HUMAN ERRORS INTENTIONAL Strongly connected 287 288 section 2 PRODUCT DESIGN AND PROCESS SELECTION EXHIBIT 7.10 Before Improvement Poka-Yoke Example (Placing labels on parts coming down a conveyor) The operation depended on the worker’s vigilance. After Improvement Device to ensure attachment of labels Labeler Label Blank tape Photoelectric tube The tape fed out by the labeler turns sharply so that the labels detach and project out from the tape. This is detected by a photoelectric tube and, if the label is not removed and applied to the product within the tact time of 20 seconds, a buzzer sounds and the conveyor stops. Effect: Label application failures were eliminated. Cost: 15,000 ($75) EXHIBIT 7.11 ISO 9000 Standards, Their Areas of Application in Production Flow, and Guidelines for Use QUALITY SYSTEM 9001: Model for Quality Assurance in Design, Production, Installation, and Servicing. (To be used when conformance to specified requirements is to be assured by the supplier during several stages that may include design/development, production, installation, and servicing.) 9002: Model for Quality Assurance in Procurement, Production, and Installation. (To be used when conformance to specified requirements is to be assured by the supplier during production and installation.) 9003: Model for Quality Assurance in Final Inspection Test. (To be used when conformance to specified requirements is to be assured by the supplier solely at final inspection and test.) GUIDELINES FOR USE 9000: Quality Management and Quality Assurance Standards—Guidelines for Selection and Use. 9004: Quality Management and Quality System Elements—Guidelines. Design/ Development Procurement Production Installation Servicing ISO9003 ISO9002 ISO9001 Quite a bit of work and expense may be needed to be accredited at the highest level, which is 9001. Furthermore, some firms may not need ISO 9001 accreditation. For example, note that in Exhibit 7.11, ISO 9003 covers quality in production’s final inspection and testing. A firm can be accredited at this level of final production only. This would essentially guarantee the firm’s quality of final output and be attractive to customers. A broader accreditation would be 9002, which extends from purchasing and production through installation. TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA chapter 7 There are 20 elements in the ISO 9000 standards that relate to how the system operates and how well it is performing. These are contained in section 4 of the ISO 9000 Guidelines. Each of these elements applies in varying degrees to the three standards 9001, 9002, and 9003. (ISO 9001 contains all of them.) ISO 9000 is intentionally vague. (For example, a sample standard statement is “Procedures shall be prepared.”) A firm interprets the requirements as they relate to its business. From a practical and useful standpoint for businesses, ISO 9000 is valuable to firms because it provides a framework so they can assess where they are and where they would like to be. In its simplest terms, it is sometimes stated that ISO 9000 directs you to “document what you do and then do as you documented.” I S O 9 0 0 0 C E RT I F I C AT I O N Why is it important to become ISO 9000 certified? For one reason, it is essential from a purely competitive standpoint. Consider the situation where you need to purchase parts for your firm, and several suppliers offer similar parts at similar prices. Assume that one of these firms has been ISO 9000 certified and the others have not. From whom would you purchase? There is no doubt that the ISO 9000–certified company would have the inside track in your decision making. Why? Because ISO 9000 specifies the way the supplier firm operates as well as its quality standards, delivery times, service levels, and so on. There are three forms of certification: 1 First party: A firm audits itself against ISO 9000 standards. 2 Second party: A customer audits its supplier. 3 Third party: A “qualified” national or international standards or certifying agency serves as auditor. The best certification of a firm is through a third party. Once passed by the third-party audit, a firm is certified and may be registered and recorded as having achieved ISO 9000 status, and it becomes part of a registry of certified companies. This third-party certification also has legal advantages in the European Community. For example, a manufacturer is liable for injury to a user of the product. The firm, however, can free itself from any liability by showing that it has used the appropriate standards in its production process and carefully selected its suppliers as part of its purchasing requirement. For this reason, there is strong motivation to choose ISO 9000–certified suppliers. EXTERNAL BENCHMARKING FOR QUALITY IMPROVEMENT ● ● ● The quality improvement approaches described so far are more or less inward looking. They seek to make improvements by analyzing in detail the current practices of the company itself. External benchmarking, however, goes outside the organization to examine what industry competitors and excellent performers outside of industry are doing. Benchmarking typically involves the following steps: Identify processes needing improvement. Identify a firm that is the world leader in performing the process. For many processes, this may be a company that is not in the same industry. Examples would be Proctor & Gamble using L.L Bean as the benchmark in evaluating its order entry system, or ICL (a large British computer maker) benchmarking Marks and Spenser (a large U.K. clothing retailer) to improve its distribution system. A McKinsey study cited a firm that measured pit stops on a motor racing circuit as a benchmark for worker changes on its assembly line.5 External benchmarking 289 290 section 2 PRODUCT DESIGN AND PROCESS SELECTION Contact the managers of that company and make a personal visit to interview managers and workers. Many companies select a team of workers from that process as part of the team of visitors. Analyze data. This entails looking at gaps between what your company is doing and what the benchmarking company is doing. There are two aspects of the study: one is comparing the actual processes; the other is comparing the performance of these processes according to a set of measures. The processes are often described using flowcharts and subjective evaluations of how workers relate to the process. In some cases, companies permit videotaping, although there is a tendency now for benchmarked companies to keep things under wraps for fear of giving away process secrets. SERV SERVICE QUALITY MEASUREMENT: SERVQUAL AL QU SERVQUAL ● ● ● Although the approaches to improving product quality are equally applicable to services, identifying what should be improved requires tapping the customer’s satisfaction with the service process as well as the outcome from that process. A standard approach to making this determination is to measure the gap between what customers expected and their perceptions of the service provided in a service encounter (see Exhibit 7.12). The size of the gap indicates where improvements should be made. The measurement is done by having customers fill out the SERVQUAL questionnaire6 (contained on the CD-ROM that accompanies this book). The questionnaire consists of 22 expectation and matching perception questions relating to the five statistically derived dimensions of service quality listed in Exhibit 7.12. Each item is scored on a 1 to 7 scale, from strongly disagree (1) to strongly agree (7). For example, expectation question 1 states that the company under study “should have up-to-date equipment”; and perception question 1 states that the company “has up-to-date equipment.” Thus, if the customer assigns a 6 to expectation and 4 to perception, the gap score is −2. (By convention, expectations are subtracted from perceptions.) Typically, tangibles have the lowest gap score because physical features of a service are easier to control. W e i g h t e d S E R V Q U A L The SERVQUAL procedure also permits assignment of importance weightings to each of the five dimensions. This is done by allocating 100 points across the dimensions and then multiplying the dimension gap score by points assigned to it. EXHIBIT 7.12 Perceived Service Quality Word of mouth Dimensions of Service Quality* Reliability Responsiveness Assurance Empathy Tangibles Personal needs Expected service Perceived service Past experience Perceived Service Quality 1. Expectations exceeded ES < PS (Quality surprise) 2. Expectations met ES ≈ PS (Satisfactory quality) 3. Expectations not met ES > PS (Unacceptable quality) *Reliability: the ability to perform service as promised, both dependably and accurately. Responsiveness: willingness to help customers promptly. Assurance: knowledge and courtesy of employees, as well as their ability to convey trust. Empathy: caring and individualized attention. Tangibles: the appearance of physical facilities, equipment, and personnel, as well as other factors affecting the senses such as noise and temperature. SOURCE: ADAPTED WITH PERMISSION FROM THE JOURNAL OF MARKETING, PUBLISHED BY THE AMERICAN MARKETING ASSOCIATION, A. PARASURAMAN, V. A. ZEITHHAML, AND L. L. BERRY, “A CONCEPTUAL MODEL OF SERVICE QUALITY AND ITS IMPLICATIONS FOR FUTURE RESEARCH,” FALL 1985/49, P. 48. TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA 1. Reliability involves the correct technical functioning of the site and the accuracy of service promises (having items in stock, delivering when promised), billing, and product information. 2. Responsiveness means quick response and the ability to get help if there is a problem or question. chapter 7 291 EXHIBIT 7.13 Dimensions of Perceived e-SQ 3. Access is the ability to get on the site quickly and to reach the company when needed. 4. Flexibility involves choice of ways to pay, ship, buy, search for, and return items. 5. Ease of navigation means that a site contains functions that help customers find what they need without difficulty, possesses a good search engine, and allows the customer to maneuver easily and quickly back and forth through the pages. 6. Efficiency means that a site is simple to use, is structured properly, and requires a minimum of information to be input by the customer. 7. Assurance trust involves the confidence the customer feels in dealing with the site and is due to the reputation of the site and the products or services it sells as well as clear and truthful information presented. 8. Security privacy involves the degree to which the customer believes the site is safe from intrusion and personal information is protected. 9. Price knowledge is the extent to which the customer can determine shipping price, total price, and comparative prices during the shopping process. 10. Site aesthetics relates to the appearance of the site. 11. Customization/personalization is how much and how easily the site can be tailored to individual customers’ preferences, histories, and ways of shopping. SOURCE: VALARIE A. ZEITHAML, A. PARASURAMAN, AND ARVIND MALHOTRA, “A CONCEPTUAL FRAMEWORK FOR UNDERSTANDING E-SERVICE QUALITY: IMPLICATIONS FOR FUTURE RESEARCH AND MANAGERIAL PRACTICE,” MARKETING SCIENCE INSTITUTE, REPORT SUMMARY 00-115, 2001, P. 14. All five weighted dimension scores are then added to derive an overall weighted service quality score. Bank customers, for example, usually weight reliability heavily and tangibles lightly. e - S E R V I C E Q U A L I T Y A new version of SERVQUAL, e-SERVICE QUALITY has been developed to evaluate service on the Internet. e-SQ is defined as the extent to which a website facilitates efficient and effective shopping, purchasing, and delivery. Its dimensions are shown in Exhibit 7.13. e-SERVICE QUALITY CONCLUSION ● ● ● How to achieve TQM is no secret anymore. The challenge is to make certain that a quality program really does have a customer focus and is sufficiently agile to be able to make improvements quickly without losing sight of the real time needs of the business. The quality system must be analyzed for its own quality. There is also a need for sustaining a quality culture over the long haul. Some companies (who will remain nameless) that gained a great reputation for quality in the 1980s and ’90s simply ran out of gas in their quality efforts—their managers just couldn’t sustain the level of enthusiasm necessary for quality to remain a top priority goal. As Tom Peters has said, “Most Quality programs fail for one of two reasons: they have system without passion, or passion without system.”7 KEY TERMS Total quality management (TQM) Managing the entire organization so that it excels on all dimensions of products and services that are important to the customer. Malcolm Baldrige National Quality Award An award established by the U.S. Department of Commerce given annually to companies that excel in quality. Design quality The inherent value of the product in the marketplace. Conformance quality The degree to which the product or service design specifications are met. Quality at the source The person who does the work is responsible for ensuring that specifications are met. Dimensions of quality Criteria by which quality is measured. Cost of quality Expenditures related to achieving product or service quality, such as the costs of prevention, appraisal, internal failure, and external failure. Six Sigma A statistical term to describe the quality goal of no more than four defects out of every million units. Also refers to a quality improvement philosophy and program. 292 section 2 PRODUCT DESIGN AND PROCESS SELECTION DPMO (defects per million opportunities) A metric used to describe the variability of a process. Fail-safe or poka-yoke procedures Simple practices that prevent errors or provide feedback in time for the worker to correct errors. DMAIC An acronym for the Define, Measure, Analyze, Improve, and Control improvement methodology followed by companies engaging in Six-Sigma programs. ISO 9000 Formal standards used for quality certification, developed by the International Organization for Standardization. PDCA cycle Also called “The Deming cycle or wheel”; refers to the plan–do–check–act cycle of continuous improvement. Continuous improvement The philosophy of continually seeking improvements in processes through the use of team efforts. Kaizen Japanese term for continuous improvement. Black belts, master black belts, green belts Terms used to describe different levels of personal skills and responsibilities in Six-Sigma programs. REVIEW AND ISO 14000 A series of standards to control the impact of an organization’s activities and outputs on the environment. External benchmarking Looking outside the company to examine what excellent performers inside and outside the company’s industry are doing in the way of quality. SERVQUAL A service quality questionnaire that measures the gap between customer expectations and perceptions of performance after a service encounter. e-SERVICE QUALITY A version of SERVQUAL designed to evaluate service on the Internet. DISCUSSION QUESTIONS 1 Is the goal of Six Sigma realistic for services such as Blockbuster Video stores? 2 “If line employees are required to work on quality improvement activities, their productivity will suffer.” Discuss. 3 “You don’t inspect quality into a product; you have to build it in.” Discuss the implications of this statement. 4 “Before you build quality in, you must think it in.” How do the implications of this statement differ from those in question 4? 5 Business writer Tom Peters has suggested that in making process changes, we should “Try it, test it, and get on with it.” How does this square with the DMAIC/continuous improvement philosophy? 6 Shingo told a story of a poka-yoke he developed to make sure that the operators avoided the mistake of putting fewer than the required four springs in a push-button device. The existing method involved assemblers taking individual springs from a box containing several hundred, and then placing two of them behind an ON button and two more behind an OFF button. What was the poka-yoke Shingo created? 7 A typical word processing package is loaded with poka-yokes. List three. Are there any others you wish the packages had? PROBLEMS 1 A manager states that his process is really working well. Out of 1,500 parts, 1,477 were produced free of a particular defect and passed inspection. Based upon DPMO, how would you rate this performance, other things being equal? 2 Professor Chase is frustrated by his inability to make a good cup of coffee in the morning. Show how you would use a fishbone diagram to analyze the process he uses to make a cup of his evil brew. 3 Use the benchmarking process and as many DMAIC/CI analytical tools as you can to show how you can improve your performance in your weakest course in school. 4 Consider a simple repair job that you performed that did not turn out particularly well. Analyze the mistakes or defects you made using the Sources of Defects table presented in Exhibit 7.9. Which errors were your fault? 5 Evaluate the service quality of your bank using the perceptions of performance portion of the SERVQUALquestionnaire contained on the student CD-ROM. Compute the score for each of the five SERVQUAL dimensions. On which dimensions does your bank score the highest? Lowest? 6 Evaluate the service quality of your bank’s website using the Dimensions of Perceived e-SQ given in Exhibit 7.13. 7 Prepare a SIPOC flowchart of the major steps in the process of boarding a commercial flight. Start the process with the passenger arriving curbside at your local airport. 8 Prepare an opportunity flow diagram for the same process of boarding a commercial flight. TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA 1 2 XERCISES Visit the Baldrige Award website and see who won this year. What quality ideas did the winner demonstrate? What did the winner do that was particularly creative? Visit the Six Sigma website to see how companies are applying the concept. CASE: HANK KOLB, DIRECTOR OF 293 www.quality.nist.gov/show.htm net Inte r INTERNET ENRICHMENT E chapter 7 www.isixsigma.com QUALITY ASSURANCE ● ● ● Hank Kolb was whistling as he walked toward his office, still feeling a bit like a stranger since he had been hired four weeks before as director of quality assurance. All that week he had been away from the plant at an interesting seminar, entitled “Quality in the 90s,” given for quality managers of manufacturing plants by the corporate training department. He was now looking forward to digging into the quality problems at this industrial products plant employing 1,200 people. Kolb poked his head into the office of Mark Hamler, his immediate subordinate as the quality control manager, and asked him how things had gone during the past week. Hamler’s muted smile and an “Oh, fine,” stopped Kolb in his tracks. He didn’t know Hamler very well and was unsure about pursuing this reply any further. Kolb was still uncertain of how to start building a relationship with him because Hamler had been passed over for the promotion to Kolb’s job; Hamler’s evaluation form had stated “superb technical knowledge; managerial skills lacking.” Kolb decided to inquire a little further and asked Hamler what had happened; he replied, “Oh, just another typical quality snafu. We had a little problem on the Greasex line last week [a specialized degreasing solvent packed in a spray can for the high-technology sector]. A little high pressure was found in some cans on the second shift, but a supervisor vented them so that we could ship them out. We met our delivery schedule!” Because Kolb was still relatively unfamiliar with the plant and its products, he asked Hamler to elaborate; painfully, Hamler continued: We’ve been having some trouble with the new filling equipment and some of the cans were pressurized beyond our AQL [acceptable quality level] on a psi rating scale. The production rate is still 50 percent of standard, about 14 cases per shift, and we caught it halfway into the shift. Mac Evans [the inspector for that line] picked it up, tagged the cases “hold,” and went on about his duties. When he returned at the end of the shift to write up the rejects, Wayne Simmons, first-line supervisor, was by a pallet of finished goods finishing sealing up a carton of the rejected Greasex; the reject “hold” tags had been removed. He told Mac that he had heard about the high pressure from another inspector at coffee break, had come back, taken off the tags, individually turned the cans upside down and vented every one of them in the eight rejected cartons. He told Mac that production planning was really pushing for the stuff and they couldn’t delay by having it sent through the rework area. He told Mac that he would get on the operator to run the equipment right next time. Mac didn’t write it up but came in about three days ago to tell me about it. Oh, it happens every once in a while and I told him to make sure to check with maintenance to make sure the filling machine was adjusted; and I saw Wayne in the hall and told him that he ought to send the stuff through rework next time. Kolb was a bit dumbfounded at this and didn’t say much—he didn’t know if this was a big deal or not. When he got to his office he thought again what Morganthal, general manager, had said when he had hired him. He warned Kolb about the “lack of quality attitude” in the plant, and said that Kolb “should try and do something about this.” Morganthal further emphasized the quality problems in the plant: “We have to improve our quality; it’s costing us a lot of money, I’m sure of it, but I can’t prove it! Hank, you have my full support in this matter; you’re in charge of these quality problems. This downward quality–productivity–turnover spiral has to end!” The incident had happened a week before; the goods were probably out in the customers’ hands by now, and everyone had forgotten about it (or wanted to). There seemed to be more pressing problems than this for Kolb to spend his time on, but this continued to nag him. He felt that the quality department was being treated as a joke, and he also felt that this was a personal slap from manufacturing. He didn’t want to start a war with the production people, but what could he do? Kolb was troubled enough to cancel his appointments and spend the morning talking to a few people. After a long and very tactful morning, he learned the following information: 1 From personnel. The operator for the filling equipment had just been transferred from shipping two weeks ago. He had no formal training in this job but was being trained by Wayne, on the job, to run the equipment. When Mac had tested the high-pressure cans, the operator was nowhere to be found and had only learned of the rejected material from Wayne after the shift was over. 2 From plant maintenance. This particular piece of automated filling equipment had been purchased two years ago for use on another product. It had been switched to the Greasex line six months ago and maintenance completed 12 work orders during the last month for repairs or adjustments on it. The equipment had been adapted by plant maintenance for handling the lower viscosity of Greasex, which it had not originally been designed for. This included designing a special filling head. There was no scheduled preventive maintenance for this equipment, and the parts for the sensitive filling head, replaced three times in the last six months, had to be made at a nearby machine shop. Nonstandard downtime was 15 percent of actual running time. 3 From purchasing. The plastic nozzle heads for the Greasex can, designed by a vendor for this new product on a rush order, were often found to have slight burrs on the inside rim, and this caused some trouble in fitting the top to the can. An increase in application pressure at the filling head by maintenance adjustment had solved the burr application problem or had at least forced the nozzle heads on despite burrs. Purchasing agents said that they were going to talk to the sales representative of the nozzle head supplier about this the next time he came in. 4 From product design and packaging. The can, designed especially for Greasex, had been contoured to allow better gripping by the user. This change, instigated by marketing research, set Greasex apart from the appearance of its competitors and was seen as significant by the designers. There had been no test of the effects of the contoured can on 294 section 2 PRODUCT DESIGN AND PROCESS SELECTION What bothered Kolb most was the safety issue of the high pressure in the cans. He had no way of knowing how much of a hazard the high pressure was or if Simmons had vented them enough to effectively reduce the hazard. The data from the can manufacturer, which Hamler had showed him, indicated that the high pressure found by the inspector was not in the danger area. But, again, the inspector had used only a sample testing procedure to reject the eight cases. Even if he could morally accept that there was no product safety hazard, could Kolb make sure that this would never happen again? Skipping lunch, Kolb sat in his office and thought about the morning’s events. The past week’s seminar had talked about the role of quality, productivity and quality, creating a new attitude, and the quality challenge; but where had they told him what to do when this happened? He had left a very good job to come here because he thought the company was serious about the importance of quality, and he wanted a challenge. Kolb had demanded and received a salary equal to the manufacturing, marketing, and R&D directors, and he was one of the direct reports to the general manager. Yet he still didn’t know exactly what he should or shouldn’t do, or even what he could or couldn’t do under these circumstances. filling speed or filling hydrodynamics from a high-pressured filling head. Kolb had a hunch that the new design was acting as a venturi (carrier creating suction) when being filled, but the packaging designer thought that was unlikely. 5 From the manufacturing manager. He had heard about the problem; in fact, Simmons had made a joke about it, bragging about how he beat his production quota to the other foremen and shift supervisors. The manufacturing manager thought Simmons was one of the “best foremen we have . . . he always got his production out.” His promotion papers were actually on the manufacturing manager’s desk when Kolb dropped by. Simmons was being strongly considered for promotion to shift supervisor. The manufacturing manager, under pressure from Morganthal for cost improvements and reduced delivery times, sympathetized with Kolb but said that the rework area would have vented with their pressure gauges what Wayne had done by hand. “But I’ll speak with Wayne about the incident,” he said. 6 From marketing. The introduction of Greasex had been rushed to market to beat competitors, and a major promotional advertising campaign was under way to increase consumer awareness. A deluge of orders was swamping the order-taking department and putting Greasex high on the back-order list. Production had to turn the stuff out; even being a little off spec was tolerable because “it would be better to have it on the shelf than not there at all. Who cares if the label is a little crooked or the stuff comes out with a little too much pressure? We need market share now in that high-tech segment.” QUESTIONS 1 What are the causes of the quality problems on the Greasex line? Display your answer on a fishbone diagram. 2 What general steps should Hank follow in setting up a continuous improvement program for the company? What problems will he have to overcome to make it work? SOURCE: COPYRIGHT 1981 BY PRESIDENT AND FELLOWS OF HARVARD COLLEGE, HARVARD BUSINESS SCHOOL. CASE 681.083. THIS CASE WAS PREPARED BY FRANK S. LEONARD AS THE BASIS FOR CLASS DISCUSSION REPRINTED BY PERMISSION OF THE HARVARD BUSINESS SCHOOL. RATHER THAN TO ILLUSTRATE EITHER EFFECTIVE OR INEFFECTIVE HANDLING OF AN ADMINISTRATIVE SITUATION. CASE: SHORTENING CUSTOMERS’ TELEPHONE WAITING TIME ● ● ● This case illustrates how a bank applied some of the basic tools shown in Exhibit 7.6 and storyboard concepts to improve customer service. It is the story of a quality circle (QC) program implemented in the main office of a large bank. An average of 500 customers call this office every day. Surveys indicated that callers tended to become irritated if the phone rang more than five times before it was answered, and often would not call the company again. In contrast, a prompt answer after just two rings reassured the customers and made them feel more comfortable doing business by phone. SELECTION OF A THEME Telephone reception was chosen as a QC theme for the following reasons: (1) Telephone reception is the first impression a customer receives from the company; (2) this theme coincided with the company’s telephone reception slogan, “Don’t make customers wait, and avoid needless switching from extension to extension”; and (3) it also coincided with a companywide campaign being promoted at that time that advocated being friendly to everyone one met. First, the staff discussed why the present method of answering calls made callers wait. Exhibit 7.14 illustrates a frequent situation EXHIBIT 7.14 Why Customers Had to Wait (1) Customer A Customer B (2) Operator Receiving party TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA 295 chapter 7 EXHIBIT 7.15 Cause-and-Effect Diagram Receiving party not present Working system of operators Absent Telephone call rush Out of office Lunchtime rest Not at desk Absent Makes customer wait Lengthy conversation Not giving section and name of receiving party Complaining Does not understand customer’s message Lack of knowledge of company jobs Takes time to explain branch office location Starts leaving a message Customer Operator EXHIBIT 7.16 Causes of Callers’ Waits A. Checksheet—Designed to Identify the Problems REASON Date NO ONE PRESENT IN SECTION RECEIVING THE CALL RECEIVING PARTY NOT PRESENT ONLY ONE OPERATOR (PARTNER OUT OF THE OFFICE) TOTAL June 4 24 June 5 32 June 6 28 June 15 25 B. Reasons Why Callers Had to Wait DAILY AVERAGE TOTAL NUMBER 14.3 172 A One operator (partner out of the office) B Receiving party not present 6.1 73 C No one present in the section receiving the call 5.1 61 D Section and name of receiving party not given 1.6 19 E Inquiry about branch office locations 1.3 16 F Other reasons 0.8 10 29.2 351 Total C. Reasons Why Callers Had to Wait (Pareto Diagram) 100% 87.1% 300 71.2% 200 49.0% 100 Period: 12 days from June 4 to 16, 1980 0 ABCDEF 296 section 2 PRODUCT DESIGN AND PROCESS SELECTION in which a call from customer B comes in while the operator is talking with customer A. Let’s see why the customer has to wait. At (1), the operator receives a call from the customer but, due to lack of experience, does not know where to connect the call. At (2), the receiving party cannot answer the phone quickly, perhaps because he or she is unavailable, and no one else can take the call. The result is that the operator must transfer the call to another extension while apologizing for the delay. CAUSE-AND-EFFECT (FISHBONE) DIAGRAM AND SITUATION ANALYSIS To fully understand the situation, the quality circle members decided to conduct a survey regarding callers who waited for more than five rings. Circle members itemized factors at a brainstorming discussion and arranged them in a cause-and-effect diagram. (See Exhibit 7.15.) Operators then kept checksheets on several points to tally the results spanning 12 days from June 4 to 16. (See Exhibit 7.16.) RESULTS OF THE CHECKSHEET SITUATION ANALYSIS The data recorded on the checksheets unexpectedly revealed that “one operator (partner out of the office)” topped the list by a big margin, occurring a total of 172 times. In this case, the operator on duty had to deal with large numbers of calls when the phones were EXHIBIT 7.17 busy. Customers who had to wait a long time averaged 29.2 daily, which accounted for 6 percent of the calls received every day. (See Exhibits 7.16B and 7.16C.) SETTING THE TARGET After an intense but productive discussion, the staff decided to set a QC program goal of reducing the number of waiting callers to zero. That is to say that all incoming calls would be handled promptly, without inconveniencing the customer. MEASURES AND EXECUTION 1 Taking lunches on three different shifts, leaving at least two operators on the job at all times. Until this resolution was made, a two-shift lunch system had been employed, leaving only one operator on the job while the other was taking a lunch break. However, because the survey revealed that this was a major cause of customers waiting on the line, the company brought in a helper operator from the clerical section. 2 Asking all employees to leave messages when leaving their desks. The objective of this rule was to simplify the operator’s chores when the receiving party was not at his desk. The new program was explained at the employees’ regular morning meetings, and companywide support was requested. Effects of QC A. Effects of QC (Comparison of before and after QC) REASON WHY CALLERS HAD TO WAIT A B C D E F TOTAL NUMBER DAILY AVERAGE BEFORE AFTER BEFORE AFTER One operator (partner out of the office) Receiving party not present No one present in the section receiving the call Section and name of receiving party not given Inquiry about branch office locations Others Total 172 73 61 19 16 10 15 17 20 4 3 0 14.5 6.1 5.1 1.6 1.3 0.8 1.2 1.4 1.7 0.3 0.2 0 351 59 29.2 4.8 Period: 12 days from Aug. 17 to 30. Problems are classified according to cause and presented in order of the amount of time consumed. They are illustrated in a bar graph. 100% indicates the total number of time-consuming calls. B. Effects of QC (Pareto Diagram) 100% 350 300 Effects 300 200 200 Before 100 After 100 100% 0 0 A B C D E F C B A D E TOTAL QUALITY MANAGEMENT: FOCUS ON SIX SIGMA 3 To help implement this practice, posters were placed around the office to publicize the new measures. Compiling a directory listing the personnel and their respective jobs. The notebook was specially designed to aid the operators, who could not be expected to know the details of every employee’s job. The notebook would help properly route calls. chapter 7 297 CONFIRMING THE RESULTS Although the waiting calls could not be reduced to zero, all items presented showed a marked improvement as shown in Exhibits 7.17A and 7.17B. The major cause of delays, “one operator (partner out of the office),” plummeted from 172 incidents during the control period to 15 in the follow-up survey. SOURCE: FROM “THE QUEST FOR HIGHER QUALITY—THE DEMING PRIZE AND QUALITY CONTROL,” RICOH COMPANY, LTD., IN MASAAKI IMAI, KAIZEN: THE KEY TO JAPAN’S COMPETITIVE SUCCESS (NEW YORK: RANDOM HOUSE, 1986), PP. 54–58. CASE: “ H E Y, I S A N Y B O D Y T H E R E ? ” A N E X A M P L E AMERICAN EXPRESS ● ● ● In this case the customer is using Six Sigma to reduce defects in a service. THE GENERAL SITUATION A number of merchants that accept American Express cards fail to place point-of-purchase materials (e.g., decals) that notify customers that they can use these cards at these establishments while displaying competing (e.g., Visa, Mastercard, etc.) point-of-purchase materials. American Express defines these merchants as “passive suppressors.” In an effort to increase visibility, an external vendor that placed point-of-purchase material in the marketplace, identified passive suppressors, and measured placement and passive suppression rates was hired by American Express. However, the vendor had a significant rate of failure to contact or meet with the merchants. The leading reason for not meeting with the merchant was that the store was closed when the vendor stopped by. OF DMAIC AT uncallable without first checking to see if any point-of-purchase materials were visible from the outside. This resulted in merchants who displayed point-of-purchase material being visited multiple times— leading to rework. IMPROVE American Express then tested and validated their hypotheses. The call hours for all visits were changed to begin after 10:00 A.M. The vendor was required to continue the inspection process with respect to external placement of point-of-purchase material. The first change, revised call hours, resulted in a decrease to 4.5 percent from 8.0 percent in the defect rate. The second change, continued inspection, indicated that 35.4 percent of the remaining 4.5 percent closed stores actually had external point-of-purchase material displayed. Combined, these two changes had the following effects: the defect rate decreased to 2.8 percent, the number of defects per million decreased to 28,000, and the sigma level increased to 3.2. DEFINE AND MEASURE The objective was to reduce closed store uncallables (failures to contact), which represented 27.4 percent of total uncallables and 8.0 percent of the annualized attempted visits. The process represented a 2.9 sigma level and 80,000 defects per million opportunities. CONTROL In order to achieve control, American Express uses a p control chart to track the proportion of closed stores over time and the vendor call report was revised to reflect the uncallable rate by reason. ANALYZE A Pareto chart pointed to the “closed store” category as the number one reason for uncallables. By shadowing the vendor on merchant visits, American Express learned that the visits took place between 8:00 A.M. and 6:00 P.M. Of the closed stores, 45 percent were retail establishments and 16 percent were restaurants. Typically, these two types of establishments are not open before 10:00 A.M. Therefore, American Express hypothesized that the hours the vendor was calling on the merchant contributed to the high uncallable rate. It also was determined that if an establishment was closed, the inspection process was terminated with the merchant being reported as QUESTIONS 1 In terms of “design quality” and “conformance quality,” explain how using the Six-Sigma approach helped American Express. 2 In the case, American Express uncovered the two primary causes of the uncallable rate by “shadowing” the vendor. What Six Sigma/continuous improvement tools might the vendor have used to uncover the same information and revise the process? 3 What are some of the limitations of the Six-Sigma approach when there is subjectivity in the metrics used? SOURCE: SAI KIM, “SERVICE QUALITY SIX SIGMA CASE STUDIES,” ANNUAL QUALITY CONGRESS PROCEEDINGS 54 (MAY 2000). SELECTED BIBLIOGRAPHY Bemowski, K., and B. Stratton, eds. 101 Good Ideas: How to Improve Just About Any Process. Washington, DC: American Society for Quality, 1999. Chowdhury, Subir. Design for Six Sigma. Chicago: Dearborn Trade Publishing, 2002. Blakeslee, Jerome A., Jr. “Implementing the Six Sigma Solution.” Quality Progress, July 1999, pp. 77–85. Chowdhury, S., and K. Zimmer. QS-9000 Pioneers—Registered Companies Share Their Strategies for Success. Burr Ridge, IL: Richard D. Irwin, 1996. Brue, Greg. Six Sigma for Managers. New York: McGraw-Hill, 2002. Crosby, P. B. Quality Is Free. New York: McGraw-Hill, 1979. 298 section 2 PRODUCT DESIGN AND PROCESS SELECTION ______. Quality Is Still Free. New York: McGraw-Hill, 1996. Deming, W. E. Quality, Productivity and Competitive Position. Cambridge, MA: MIT Center for Advanced Engineer Study, 1982. Eckes, George. 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Berry, “SERVQUAL: A Multiple-Item Scale for Measuring Customer Perceptions of Service Quality,” Journal of Retailing 64, no. 1 (Spring 1988), pp. 12–40. 7 Tom Peters, Thriving on Chaos (New York: Knopf, 1987), p. 74.
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